How to Lose More Money Than You Ever Imagined, Part I

Seems like everyone in the securities industry and the financial publishing business wants to tell you how to make money. But over the course of the next few columns, I’m going to show you something different: How to lose more money than you ever imagined.

What is the benefit of that? For starters, you might recognize yourself. You could well be one of the millions of investors who are currently taking steps that are the financial equivalent of hari-kari.

If you find you’re doing the things I’m about to describe, do yourself a favor: Stop! And start doing the opposite. Otherwise, you’re likely to receive an education that makes the cost of Harvard or Princeton look modest.

The principles of successful investing are well known. It’s just that most people don’t know them and don’t have time to uncover them. Moreover, virtually no one in the “financial services” industry has an interest in doing anything other than “selling” you an answer. And few of them are good anyway.

I should begin by noting that I am uniquely qualified to discuss losing money. At one point, I frittered away almost my entire net worth in the market. (Ok, it was all of it.) To say it stung would be an understatement.

Fortunately, I was in my 20s at the time and the amount I lost seems trivial today. But it sure didn’t feel that way at the time. That was real money I could have spent on a new car, or NBA tickets, or high-end audio equipment, or girls who wanted to go out and have a good time. But it was gone. Vanished. And I had no one to blame but myself.

Don’t get me wrong. You’ll never be done making investment mistakes altogether, just as good hitters know they will still strike out from time to time. But, personally, I’m done swinging at the wild pitches and making bone-headed moves. I tell my readers I’ve already made all the dumb investment mistakes so they don’t have to.

I spent 16 years as a professional money manager. I witnessed the mistakes that hundreds of clients made. Heck, early on I helped them make them. But, eventually, I learned.

I’ve spent the last 13 years as a full-time financial writer. During that time, I’ve heard success stories from many readers. But I’ve also heard the opposite. An awful lot of people have lost a serious chunk of change chasing high returns in stocks, bonds, real estate, currencies, commodities, coins and precious metals. Some have become gun-shy as a result. They’re sitting in cash earning next to nothing while inflation guarantees them a negative real return on their money. After the traumatic events of the last few years, many people have come to believe that investing for retirement or meeting other investment goals is just about the hardest thing in the world to do.

It isn’t. But they’re doing the wrong things and they don’t realize it.

There’s no particular shame in this, incidentally. Financial literacy is not taught in most schools. Even college graduates with a business degree usually don’t know the first thing about investing in stocks or bonds. And investing can be a tricky business. Few if any investors make their initial approach to the markets with the information (or temperament) they need.

But over the next several columns, I’m going to lay out the principles of investing that lead – almost inevitably – to investment success. Instead of describing them straightforwardly, however, I’m going to describe what most investors are doing that they will eventually regret.

So when you see my subject line over the next few days – inviting you to lose more money than you ever imagined – be sure to tune in. You may be one of the millions of investors who – perhaps unwittingly – are barreling full-speed down a wrong-way street.

My goal is to get you to stop, turn around, and start heading in the right direction. Our destination? Total financial independence.

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